tv Nightly Business Report PBS January 12, 2015 7:00pm-7:31pm PST
this is "nightly business report" with tyler mathisen and sue herera. >> great plunge. oil prices drop to a near six-year low following a few days of relative stability. but how low is too low when it comes to crumbling crude. >> double whammy. earning season is here and with oil prices tumbling and the dollar soaring, will companies have a new excuse for soft results. alcoa beat earnings estimates today. the former down member has seen its stocks double since tossed out of the blue chip index. this is monday, january 12th. good evening, everyone. i'm su herera. if rainy deuce and mondays always get you down you're not alone today on a cold and damp
rainy today. stocks pushed down by tumbling energy prices which neared fresh six-year lows by the end of the session. global supplies outstripped demand and just today goldman sachs last forecast on oil calling for further declines in the prices in the year ahead. at the nymex today, domestic oil prices fell another 4%. down $2.29 a barrel. closing at $46. the lowest since april of 2009. foreign brent crude was down even more falling $2.68 a barrel. the lowest since march of '09. with oil prices in free-fall, many are asking not just how low can oil go but how low is too low. jackie d'angelis has more. >> reporter: the crude crash continues with no end in sight. prices on both sides of the atlantic now under $50 a barrel. while cheap crude means
consumers could save $50 to $75 billion on gas this year according to aaa, many are wondering how low is too low for oil. the tipping point where the drag on the economy outweighs the pickup in consumer spending. >> we're in the beginning part of the price zone right now that hurts production in a big way and starts to reverberate through the economy, the manufacturing economy especially. it will be particularly painful if we break the $40 level, and break the $33 level which is the low price target into the 20s, then it's going to be a real bleak situation. >> reporter: production is just one risk if all falls too low. the ripple effect is big oil laying off workers and pulling back on hiring. the number of jobs in the exploration and production industry probably number around 500,000 jobs. the multiplier effect the support services the dry cleaners and restaurants and real estate around those jobs
add probably another three to four times. so in theory upwards of 1.4 million jobs could be at stake. >> there's also a global impact. low oil prices don't just hurt the u.s. >> it hits canada. it hits russia and venezuela. so there could be the makings of a global financial crisis as the fallout from the impact on these countries. >> how low will oil prices go and how long will we stay there? goldman sachs ajusting the 2015 pride forecast to $47 a barrel and say we could stay under $45 before the fourth quarter of this y >> i do agree with goldman sachs' forecast. when you look at the supply/demand dynamic, it's still heavily skewed heavily to the supply side. it doesn't look like it will change before the beginning of the summer. i would expect prices to be low going into the summer. >> while supply is key, so is demand. and neither are seen changing anytime soon. for "nightly business report," i'm jackie d'an gel lus.
it's earnings seasons when companies post what they made or lost last quarter, how they did it and how they look to the future. as usual tonight, alcoa kicks off the fourth quarter earning season and posted a solid beat. 33 cents a share excluding certain items easily topping the wall street forecast as you see there. revenues are nearly $6.4 billion, also beat estimates on a 14% jump in year-over-year sales. shares initially higher. after-hours trading, after issuing promising guidance and upbeat comments from alcoa's ceo. >> if you look at the ups, the revenue is up 14%. and by the way, 50% of that is driven purely by organic growth. profitability is up. literally, we have a, i would almost call it a business trifecta. we have three groups and all of the three groups are performing
very very well. >> morgan brent with her latest results. a business trifecta he said. >> certainly you've seen stronger aluminum prices contributing to alcoa's stronger than expected earnings. i think the bigger story here this is a rebound and transformation story, to use ceo kleinfeld's own words and accelerated transformation. a stronger than expected full year really indicative of what we've seen from a mining company, to an industrial manufacturer. so value added businesses contributing products to aerospace and automotive industries. and we really saw that shift take place over the year. we started seeing that at the bottom line. you look at the revenue increase year over year. here's the even bigger number profits, earnings per share adjusted 725% increase. >> wow. >> over the fourth quarter of 2013. >> engineered quite a
turn-around there. >> and you'll see that in alcoa stocks. since the company left the dow industrials, the shares have just about doubled. >> lots of ceos saying kick me out of the dow. just kidding, folks. morgan thank you. joining us tonight, andrew berkley joins us to talk more about the fourth-quarter season and the impact it might have on the market. he is a portfolio strategist at 07 oppenheimer and company. >> thank you, sue. >> what kind of a season do you think it's going to be? there's so many cross-currents. how is it going to shake out this time around? >> yeah i'm expecting a pretty wide range of results, meaning that if you look at analysts' consensus, they're only looking for about 1% growth in the s&p 500, which is the slowest growth rate since 2012. if you take out energy it's about 4% a little bit better. if you go down the industry level, what we'll find is a wide
disparity between the losers of the earning season energy and energy related ideas are going to be down well in excess of 20% in terms of earnings growth. on the other side you have a lot of positives, which are in technology health care consumer discretionary, so for one quarter in quite a long period of time you'll continue to see a very big disparity between industries and stocks for that matter. >> do you think, andrew that the forecasters who see 1% earnings growth and only 1% are being a little too do you remember? >> as you know it's all about the level of growth and the expectations going into the earning season. we've seen the numbers come down by about 6% during the quarter. which is pretty pessimistic. we think the bar is pretty low at this point. non-energy earnings should be able to surpass the results pretty easyilyeasily. we think the guidance will be pretty upbeat given the better economic and macro data coming
into the beginning of the year. >> what about the strength of the dollar for those multi-national corporations? might it be a bit of a headwind this time? >> the other big theme is definitely the currency. the dollar is very strong. that will be a headwind for companies that derive a lot of revenues overseas. it will be more of a benefit for the domestic oriented companies. especially those with lower input costs from commodities u where the higher dollar is keeping the commodity prices down. it should be a net-net. aggregate, the s&p 500 draws about 70% of its revenues domestically and about 30% oversglaes andrew let's bring it around to third base and bring it home. are earnings at this level high enough to sustain and justify stock prices at today's levels. >> yeah. just about. valuations are definitely at the high end of the range. if we have 3% or 4% earnings at the end of the day, i don't think that's enough to support
the multiple. that will have to accelerate in the fourth quarter. if we have a stumble, we need to get back onto a stronger earnings trajectory through the year. >> andrew we'll let you go. thank you so much. >> thank you. and more now, sue, on another losing day on wall street. as another steep drop in oil prices did drag equities lower with chevron and exxon mobil the biggest decliners in the dow. blue chip stocks fell 96 points four points shy of a streak of five days in a row of triple-digit moves of one way or the other. the nasdaq was off 39 and the s&p lower by 16. a top fed policymaker said the nation's central bank should stop talking about the need to be patient, when it's about to hike interest rates. richmond federal reserve president said in order to keep inflation under control, the fed should raise rates sooner rather than later and that by dropping
the word patient from its guidance the fed would be signaling that a rate hike is near. the u.s. health care industry is a 3 trillion behemoth. that's why the annual jpmorgan in san francisco, the energy's biggest, is sometimes called the woodstock of health care. meg has more on some of the big deals and major themes of this year's conference. >> reporter: it was a big day for drug deals in critical data. the annual jpmorgan health care conference kicked off with a bang. announcing a $5.2 billion acquisition of a pharmaceutical comp paying more than double the diagnostic company's share price. bristol-myers has a drug that was stopped early because it met its goal helping patients live longer than standard chemotherapy. can biotech and pharma continue the success. >> i think so.
the outperformance is due to sus stance. it's the fact that companies have brought forward a lot of interesting new drugs. >> reporter: the conference set the agenda ahead in health care. there are about 9,000 investors in four days in san francisco. the mood was upbeat after five years of biotech outperforming the broader market. drug pricing, a debate started to heat up in 2014 around the cost of new medicines for hepatitis c and concerns there will be more pressure in other diseases. >> i believe there's been a modicum of pricing pressure for some time now. i mean i think if you go back five or ten years, we're seeing much more focus on value. we're seeing payers and patients demand more for the medicines that they're buying. i think that's a trend that will continue. i don't think it's only diabetes and oncology i think you'll see
that more broadly. >> reporter: half a dozen industry leaders all have the same answer when asked about the prospects for 2015. i'm meg terrell in san francisco. college football is getting even bigger. but not necessary live for the athletes. is it time for them to be compensated financially. the republican controlled senate is taking up legislation to resume construction of the controversial keystone pipeline setting up a showdown with president obama after he vowed
to veto the bill if it passes. the candidates of texas oil pipeline bill was approved in the house la the u.s. military central command had its twitter and youtube accounts hacked for a short time today. but people claiming to work with the islamic state militants. the twitter site even posted a thread that said quote, american soldiers we are coming watch your back end quote. no classified material was exposed, and pentagon officials which quickly suspended the site called the breach embarrassing but not a threat. the unsettling cyber attack on the u.s. military comes on the same day president obama pushed for new measures to protect the nation's computer networks from hackers. >> this is a direct threat to the economic security of american families. and we've got to stop it. if we're going to be connected, then we need to be protected. >> john harwood joins us from
washington on the new cybersecurity, and identity theft initiative that the president now plans to outline in his state of the union address. we know john that the timing of this new white house plan could not have been i guess more ironic. what's in it? >> well the white house essentially is trying to make sure that everyone has maximum information about what's happening to their identity. so it places requirements on businesses to notify customers if their identityies or information has been compromised. that's where you may see some of the political disagreement over how much onus is going to be put on business as opposed to on consumers themselves. i do think this is a promising area for bipartisan compromise because everyone is seeing what happened to sony pictures. everyone's seen the stories about target walmart, and where customers' data has been hacked. i think the president seizing on this is one way he might be able to find a place to work with the republican congress. >> john can i turn you back to the keystone pipeline.
has there been any movement on either side in terms of the congressional opposition that exists to keystone? >> no i don't think so. i think the next step we're going to see is once we get a senate vote on this it will get the 60 votes needed to go to final vote and it will pass. but it will not have the 67 votes needed to override a presidential veto just as it was well short, maybe 15 votes short or more in the house of representatives on veto override strength. i think that's when the negotiations will happen after it clears the senate. >> more purely political, i was a bit surprised to hear the press secretary today say that the white house regrets not having sent someone higher in the administration to the solidarity demonstrations in paris. >> that's right. i think the white house decided to admit a mistake there. they were getting a lot of criticism. they didn't say they regretted the president not showing up
but said a higher ranking official eric holder was in paris for meetings did not make time for this. and i think given the presence of other world leaders, including benjamin netanyahu who the french asked not to show up the white house decided that they need to acknowledge some of the criticism of not being -- taking a more active role. >> john thank you, as always. john harward in washington. the worst day in ten years, that is where we start the market focus. apparently there weren't too many blue tiff fanny boxes under the tree this year. the high-end jeweler cut the profit guidance citing a disappointing holiday season. shares off about 14% to 8901. different story for lululemon, raised its profit guidance thanks to improving trends and strong holiday results. the stock almost 7% higher $62.49 the close.
lululemon upped its profit guidance for the fourth quarter and the full year. shares up 3% to $14.57. a warning from san disk weighed on the shares today. the flash memory provide said fourth quarter revenue would come in below the forecast. shares slumped, down 14% to $83.57. american airlines saw its percentage of seats filled in december. it did see its capacity increase. it also said that its fourth quarter revenue unit will be lower than expected. shares were off more than 4.5% today to $49.58. adding to the list of earnings warnings today, core labs also cut its fourth quarter guidance. but separately after the bell it announced an increase to its dividend. the payout is now $50 a share. which is a 10% increase.
the annual yield on the dividend 2.1%. shares closed 7% lower to $103.91. dollar tree said it expects to reach an agreement by the end of the month with the federal trade commission on its planned purchase of family dollar. the retailer added that it expects to divest less than 300 stores to make that deal happen. separately family dollar sent a letter to shareholders repeating its recommendation on that shareholder's goal with the dollar tree acquisition over the proposed takeover bid from dollar general. got all that? it's a complicated story. >> that's a lot of dollars. >> that's a lot of dollars. speaking of dollars, oregon and ohio state take the field in just -- this evening in the football play-off championship game. it will undoubtedly shine the spotlight on the age-old debate whether or not college athletes should be paid dollars for playing. many already have full scholarships and medical care but is that sufficient.
former nfl player jack brewer joins us now with thinks thoughts. he's ceo and founder of his own money management group. jack always great to see you. you played intercollegiate football. this new play-off structure has generated millions maybe even billions in extra revenue for schools. the coaches are paid millions of dollars a year. should players be compensated, too? >> definitely tyler. you know me i'm a capitalist. at the same time you know what it's right and wrong. you look at all the hours that these players are putting in. it's just a shame that many of them are going through three, four years of college, no degree and no compensation. at some point we have to change this system. >> there are those who would say, jack though that many of them do have full scholarships and medical care and that should be enough compensation especially if they do finish college, before they join the pros if they join the pro, basically they have a great education and they can go on. >> it is for a lot of the
majority. probably 90% to 92% of the players would never even ask for compensation. most guys would rather go get a four-year degree at a university. there's a small percentage that are just there, wasting scholarships you're not going to class anyway. a lot of them don't graduate so why not take the scholarships and give it to someone who's really going to use it. >> let's talk about some things that really surprise me. one, as i did my research is the ncaa rule that caps the amount of money that athletes can make outside in their spare time something like $2,000 a year. i understand why that rule is there, so some big alumni can't give a kid a $10,000 job that he or she doesn't show up for. but $2,000 in this day and age sounds a little low to me. >> it's pretty sad. i had two children while i played college football. you're talking 15 years ago, tyler. i was only allowed to make $2,000 per year.
so you can only imagine so many guys with families they have other obligations, they come from backgrounds where their parents don't have a lot of money, so it's just -- it's unamerican to put these players through that and not allow them to make a living. >> the other issue which you're so very familiar with when you financially counsel and handle client accounts especially with former nfl players, is whether or not these young people are capable of managing whatever -- if they were paid -- would they be able to manage it financially? and sufficiently? what do you think? >> i think you can put in compensation deferment programs. you don't have to pay the players all the money up front. put procedures in place that will teach them to protect them from themselves. that's the biggest issue. a lot of these guys are -- and ladies -- are young. and they haven't had that financial background that education. how you make up for that is putting things in place where they're not allowed to take all
their money at once. in regards to the ncaa you're talking about such a fraction a small percentage of players, that it's really not that big of a deal. most players just aren't going to opt into getting paid over getting their education. and so that's the real debate. >> jack thank you very much. who do you like in the game tonight, by the way? >> ohio state all the way. i'm a big ten guy. i think the world has been exposed, and now they understand that there really is athletes in the big ten. >> rooting for the other team here. thanks very much jack. we appreciate it. jack brewer with the brewer group. >> thank you. new cars new concepts and auto industry that is optimistic about the future. a report from the biggie, the detroit auto show.
the sharp and steady drop in oil prices is expected to hit the texas state budget hard this year. just today, the state's comptroller predicted an almost 14% decline from energy production and taxes coming in the upcoming two-year budget cycle, with revenue from natural gas to fall by 8%. oil prices continue to slide. so does the cost of filling up your gas tank. u.s. drivers paid an average of $2.20 a gallon for regular gas last week. that's the lowest price for this time of year since 2009 according to the industry researchers, the lundberg survey. aaa has the national average even cheaper, $2.13 a gallon down 7 cents in just the past week. >> cheaper gas is one reason behind strong sales of new cars and trucks over the past year. with 50 new vehicles making their debut a this week's detroit auto show it's a pretty good bet car sales will be strong again in the year ahead.
phil lebeau has more from detroit. >> introducing the chevrolet bolt. >> reporter: with sales surging, the buzz is back at the detroit auto show. >> these are good times in detroit. >> reporter: there you nr performance cars and luxury models. but two electric vehicles may generate the most chatter. gm's new extended chevy volt and all-electric chevy bolt a concept car, gm estimates the bolt will have a range topping 200 miles, when it debuts in 2017 and could sell for as little as $30,000. can you make $30,000 stick? >> its 'a concept vehicle, but if it's going to fit the equation that customers are looking for, that's what we're going to do. >> reporter: while automakers are touting greater mileage, plunging gas prices have many in the industry saying it's time to revisit economy standards set five years ago, which called for auto fleets to average 54 1/2
miles per gallon by 2025. forecasting what they're going to be in the future we just need to take a very -- a fact-drivenage sits of what that will be. >> it's time to explore the future of buick. >> reporter: for now, the focus is on a resurgence in autos, not seen since the late '90s. >> there's so much enthusiasm and optimism right now. i'm hoping it's not silly optimism cockeyed optimism. it seems more pragmatic of the lessons. >> reporter: the combination of a healthy economy and strong consumer confidence has many in the auto industry believing u.s. sales this year could top $17 million for the first time since 2001. phil lebeau, "nightly business report," new york. big news coming out of the detroit auto show today, the 2015 volkswagen gulf named the north american car of the year by u.s. and canadian auto
writers and editors. the new aluminum body ford f-150 pickup was named truck of the year. that's the eighth time ford has taken home the truck of the year honors. and the fourth time by the way, for the f-150. >> congratulations all around. >> yes, indeed. >> terrific. all right. that will do it for "nightly business report" for tonight. i'm su herera. >> i'm tyler mathisen. hope to see you back here tomorrow n.
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